Federal political reporter

This chart, from the Costello audit report, shows how the projections for Queensland's operating balance and fiscal balance are different.

The Newman government has set itself a higher hurdle as it tries to get Queensland's finances back to surplus, focusing on a budget measure largely ignored by other state treasurers.

The move has fuelled claims the government may use the gloomier figures to justify deeper spending cuts and potentially future asset sales.

Queensland and other states have traditionally reported whether finances are in surplus or deficit based on an “operating balance” measurement, which, put simply, indicates the difference between revenue and day-to-day expenses.

However, Queensland Treasurer Tim Nicholls has declared the new government would also aim to achieve a “fiscal balance” in 2014-15.

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This measurement also takes into account capital spending – that is, money outlaid on assets such as building new roads and facilities.

Analysis by brisbanetimes.com.au confirms other Australian state treasurers, including those serving in conservative governments, did not mention fiscal balance in their latest budget speeches.

Instead, they all focused on the operating balance measurement when talking about surplus or deficit levels.

Deloitte Access Economics, meanwhile, has argued the operating balance is a better indicator for state and local governments.

Queensland Council of Unions president John Battams said he believed the use of the fiscal balance measure would help the government to “make the cuts even deeper”.

Mr Battams said the Newman government might use the focus on fiscal balance to boost the argument for future asset sales.

“Because it includes expenditure on capital works, infrastructure etc, it would enhance the academic argument about what we have to sell,” he said.

The first report of the government's audit commission, headed by former federal Liberal treasurer Peter Costello, suggested the fiscal balance was the broadest measure and more useful than the previously used operational balance to report on the state's budget position.

“It includes both recurrent and capital spending. It most closely equates to the borrowing requirement and therefore to movements in the debt position,” the report stated.

“The fiscal balance is also the measure that most closely equates to the underlying cash balance which is the widely reported bottom line of the Australian Government budget.

“The ratings agencies that report on the credit worthiness of Queensland securities look at debt as a proportion of revenue. A fiscal deficit will lead to increased debt. A fiscal surplus will reduce that debt.”

But a recent report by Access Economics argued the operating balance was a better indicator for state and local governments.

“These lower levels of government do not have fiscal (or monetary) policy responsibilities,” the Access Economics report stated.

“Rather they are essentially providers of public goods and services (and infrastructure), which brings with it greater emphasis on inter-generational equity issues and the different principles that need to be applied to the funding of operating expenditure on the one hand and infrastructure investment on the other.”

In Parliament last week, Mr Nicholls said the LNP would try to stabilise the debt by aiming to achieve a fiscal balance in 2014-15.

“As we stated during the election campaign, we are committed to achieving an operating balance in 2014-15,” he said.

“However, to fix the problem Queensland's finances require a real surplus – not a surplus based on heroic assumptions to meet a political need like an election, not a surplus based on GST revenues that have failed to materialise, not a phony Labor surplus.”

Mr Nicholls said fiscal balance was a more difficult measure than the operating balance but “this government will be moving to a fiscal balance measure giving a complete picture of Queensland's financing needs”.

“Unfortunately, given the level of debt Labor incurred, achieving an operating surplus is in itself not sufficient for the government to maintain fiscal sustainability or to improve our credit rating,” he said.

“To that end, the 2012-13 budget papers will report both the operating balance and the fiscal balance. This will allow Queenslanders to compare our budget to those of the former failed Labor government.”

In May, West Australian Liberal Treasurer Christian Porter trumpeted a forecast surplus of $196 million in 2012-13, saying it would be the government's fourth consecutive surplus.

However, these figures were based on the operating balance measure, not the fiscal balance favoured by Mr Nicholls and Mr Costello.

The detailed WA budget papers note that despite the projected operating surpluses, cash shortfalls are forecast until 2014-15 as revenue is likely to be too low to cover both recurrent and capital spending.

In his most recent budget speech, New South Wales Liberal Treasurer Mike Baird trumpeted the fact the state's surplus would be more than $1 billion in 2015-16.

This is based on the net operating balance measure.

However, the NSW budget papers also spell out what the fiscal balance favoured by Mr Costello will be in coming years. Such figures present a much starker picture of that state's finances.

The NSW fiscal deficit would be $3.473 billion this financial year, compared with an operating deficit of $824 million.

In 2013-14 the fiscal deficit would be $3.267 billion, compared with an operating surplus of $289 million. The following year the fiscal deficit would be $1.521 billion, compared with a $562 operating surplus.

In Victoria, meanwhile, Liberal Treasurer Kim Wells declared that the state's 2012-13 budget would be in surplus by $155 million, with the surplus progressively growing to $2.5 billion by 2015-16.

These projections were based on the operating balance measurement questioned by Mr Costello and Mr Nicholls.

South Australian Labor Treasurer Jack Snelling is projecting a return to surplus in 2015-16, while Tasmanian Labor Premier Lara Giddings has foreshadowed a return to surplus in 2013-14, also based on the operating balance measure.

University of Queensland federation fellow in economics John Quiggin said yesterday he believed the Newman government was trying to present a “dire picture” of the state's finances and the fiscal balance measure would make it look worse.

Queensland opposition frontbencher Curtis Pitt said the use of a “fiscal surplus” would include infrastructure spending in the balance and provide a justification for the Newman government to sell assets.

“This means that the LNP will look to receive asset sales proceeds in 2014-15, yet the Treasurer has not told Queenslanders is what assets the LNP will sell,” Mr Pitt said.

But a Queensland government spokeswoman last night said the state could not reduce debt by running an operating surplus alone.

“At a minimum, a zero fiscal balance is also required to stabilise debt,” she said.

The spokeswoman said both operating and fiscal measures were valid, but the audit commission and ratings agencies had recognised the state's debt position and growth in debt was unsustainable.

“A fiscal balance is therefore a better target because it takes into account borrowings needed to fund the capital program,” she said.

“The Newman government is committed to regaining the state's AAA credit rating and ratings agencies largely use a derivation of the fiscal balance (not the operating balance) to assess the financial strength of the state.”

The spokeswoman said all government operations, including capital expenditure, needed to be affordable.

“A fiscal balance will enable the government and the public to assess whether that spending is affordable,” she said.

Premier Campbell Newman and Mr Nicholls have both promised not to sell assets in their first term and to take any future proposals to an election to secure a mandate from voters.

They have previously argued such an approach was in marked difference to the way in which the Bligh government revealed its plans to privatise assets in the first budget after the 2009 election.

86 comments

Ahh yes, more number fudging.

Commenter

Daniel

Location

Vegas

Date and time

July 20, 2012, 5:47AM

@ Daniel

One can use numbers to justify almost anything.

To me it's not fudging. Rather, it's the use of these sets of numbers to justify the ideological position of the TEA PARTY - which is to reduce to an absolute minimum the public sector, in order to minimise taxes payable by the wealthy.

And, we thought we were getting a new man!!!

Mmmmm!!!!

Commenter

Dalliance

Date and time

July 20, 2012, 8:29AM

@Dalliance

I think you will find the Newman LNP will build an election fund and then start handing out the sweeteners instead of the poison, with the fear firmly entrenched that the poison will be returned should the population not kneel.

Similar events have been happening in the middle east for the last year and the dictators have all fallen, with 1 now in that position, unfortunately the failed ideology results in much harm to the civilian population.

Commenter

J. Fraser

Location

Queensland

Date and time

July 20, 2012, 8:45AM

Finally the adults are back in charge.

Commenter

mh

Location

Brisbane

Date and time

July 20, 2012, 9:06AM

Newman does not equal new man!

Commenter

PO'd Public Servant

Date and time

July 20, 2012, 9:37AM

mh: Calling them Adults is a bit rich. Bitter, petty, vindictive children would be my call.

Commenter

Daniel

Location

Vegas

Date and time

July 20, 2012, 12:04PM

That's funny Daniel that is exactly how I would describe the reaction of the ALP's supporters to their first stint in opposition for a good while. Better get used to it.

Commenter

mh

Location

Brisbane

Date and time

July 20, 2012, 3:20PM

@mh, The sooner this government embrace the fact that they are already in power and STOP campaigning, the better. Real adults would go about the business of governing, not finger pointing...

Commenter

Enough Already

Location

Brisbane

Date and time

July 20, 2012, 8:47PM

'Peter Costello, suggested the fiscal balance was the broadest measure and more useful than the previously used operational balance'

I thought it was Keating who adopted the operating balance method and Costello did not aim for a fiscal balance but rather used a future fund to partially offset the shortfall.

Commenter

Tetsu

Date and time

July 20, 2012, 6:56AM

Then again the 84 ALP Government also inherited a $60 B for Billion debt thanks to then treasurer John Howard alongside 23 percent interest rates.

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